Evans Bancorp Reports 52% Increase in Earnings per Share in Third Quarter 2011
HAMBURG, NY, October 27, 2011 – Evans Bancorp, Inc. (the “Company” or “Evans”) (NYSE Amex: EVBN), a community financial services company serving Western New York since 1920, today reported its results of operations for the third quarter ended September 30, 2011.
HIGHLIGHTS OF THE 2011 THIRD QUARTER
•
Third quarter net income increased 51% to $1.93 million from $1.28 million in the prior year period. This year’s third quarter benefited from a $0.9 million decrease in the provision for loan and lease losses and continued net interest income growth.
•
Core deposit growth continued in the third quarter with Demand, NOW and Savings deposit products gaining 9.4%, or $40.0 million. Annualized, this represents a 37.5% growth rate in core deposits.
•
Core loans (defined as total loans and leases less national direct financing leases) increased 5.3% in the third quarter of 2011, or 21.2% annualized, to $560.8 million.
•
Continued strong capital position with Total Risk-Based Capital ratio of 13.90% at September 30, 2011.
Net income was $1.9 million, or $0.47 per diluted share, in the third quarter of 2011, up 51% from net income of $1.3 million, or $0.31 per diluted share, in the third quarter of 2010. The increase in net income reflects a provision for loan and lease losses of $0.2 million in the third quarter of 2011, down $0.8 million from the provision recorded in the third quarter of 2010. The majority of the decrease in provision was a result of a $0.5 million reduction in the leasing provision quarter-over-quarter. Return on average equity was 11.37% for the third quarter of 2011, compared with 7.93% in the third quarter of 2010.
For the nine months ended September 30, 2011, net income increased 10% to $4.8 million over net income of $4.4 million in the same period in 2010. On a per share basis, year-to date earnings for 2011 was $1.16, compared with $1.26 in the prior year period, reflecting 650 thousand additional weighted average outstanding shares as a result of the Company’s successful registered offering of common stock in May 2010. The return on average equity was 9.66% for the nine-month period ended September 30, 2011, compared with 10.43% in the same period in 2010.
David J. Nasca, President and CEO of Evans Bancorp, stated, “Evans continues to see exceptional results across the board as we capture increasing market share in Western New York. Robust core loan and deposit growth continues as Evans’ brand recognition spreads and expands through the marketplace, which is a reflection of the increasing demand for community relationship banking.”
Net Interest Income Net interest income was $6.5 million for the 2011 third quarter, up $0.3 million, or 4.5%, from the third quarter of 2010 and up $0.2 million, or 3.6%, from the second quarter of 2011. Growth in net interest-earning assets drove the increase and more than offset net interest margin contraction relative to the 2010 third quarter. Core loans, which are defined as total loans and leases less direct financing leases, were $560.8 million at September 30, 2011, an increase of 15.4% from $485.8 million at September 30, 2010, and up 5.3% (21.2% annualized) from $532.5 million at June 30, 2011. The growth from the linked second quarter reflects higher commercial loans, including commercial real estate, of $24.0 million, or 5.9%, to $429.3 million.
Total deposits at September 30, 2011 were $613.2 million, up $26.5 million, or 4.5%, from June 30, 2011, and up $78.0 million, or 14.6%, since September 30, 2010. Growth for the quarter and year-over-year period was attributable to strong core deposit increases across a variety of products, including the Company’s Better Checking product (included in the NOW category) along with its complementary Better Savings product. These products have been successful in garnering new customers, rewarding existing customers for doing more business with the Bank, and ultimately developing deeper customer relationships. Partially offsetting those gains was a $13.4 million decrease, since the end of the linked quarter, in time deposits due to the roll-off of higher rate promotional CD’s and decreased brokered time deposits.
Core commercial deposit gathering is an important part of the Company’s strategic growth. Most of the Company’s $11.2 million increase in demand deposits during the third quarter of 2011 came from commercial customers. The results are due in part to the Company’s success in cross-selling its commercial loan customers into full relationships, including deposits. Although a portion of the deposit growth can be seasonal and reflective of transactional activity, the results reflect solid growth in a competitive marketplace.
The Bank’s net interest margin performed well at 3.97% for the third quarter of 2011, up 5 basis points from 3.92% in the 2011 second quarter. The increase was mostly due to the roll-off of higher rate promotional CDs, as reflected in the decrease of 7 basis points in the cost of interest bearing liabilities. Net interest margin was 4.18% in the 2010 third quarter and, when compared with the 2011 third quarter, the largest contributing factor to the compression was declining interest rates. As an environment of low interest rates continues, the Company’s loan and investment portfolios have been re-pricing into lower yields, as evidenced by the 39 basis point decline in yield on interest-earning assets during the third quarter compared with the prior-year period.
Allowance for Loan and Lease Losses and Asset Quality
Provision:The provision for loan and lease losses decreased to $0.2 million in the third quarter of 2011 from $1.0 million in the second quarter of 2011 and $1.0 million in the third quarter of 2010. The third quarter benefitted from a release of $0.2 million in leasing provision after improvement in the leasing portfolio’s charge-off and collection performance. Additionally, loan provision was lower by another $0.3 million in the third quarter after reducing provision taken previously on two commercial loans. Updated appraisals received in the third quarter on these loans indicated the collateral value is higher than the outstanding carrying balance on these loans; therefore, no reserve was taken on these loans.
Net charge-offs:There were net charge-offs to average total loans and leases of 0.09% in the third quarter of 2011, compared with 0.63% in the second quarter of 2011 and 0.18% in the third quarter of 2010.
Strong loan growth and lower provision in the third quarter of 2011 resulted in a decrease in the allowance for loan and lease losses to total loans and leases ratio to 1.88% at September 30, 2011 from 1.97% at June 30, 2011. At September 30, 2010, the ratio was 1.80%.
Non-performing loans and leases:The ratio of non-performing loans and leases to total loans and leases increased to 2.70% at September 30, 2011, from 2.36% at June 30, 2011, and from 1.96% at September 30, 2010. During the third quarter of 2011, one of the previously noted commercial loans with sufficient collateral, valued at $2.1 million, was moved into non-accrual. The total coverage ratio for non-performing loans and leases was 69.85% at September 30, 2011, compared with 83.48% at June 30, 2011.
Gary A. Kajtoch, Executive Vice President and CFO, noted, “Although non-performing loans increased in the quarter, we feel we are adequately reserved. Our conservative underwriting approach provides collateral positions that enable us to exit these non-performing loans with minimal to no losses. This is evidenced by our history of low charge-off rates in our core loan portfolio.”
The FDIC-assisted acquisition of Waterford Village Bank in July 2009 accounted for $2.3 million, or approximately 15.2%, of the Company’s $15.3 million in non-performing loans at September 30, 2011. These loans are included in a loss-sharing agreement with the FDIC in which the FDIC bears at least 80% of the losses on these loans. On an adjusted basis, Evans’ coverage ratio for non-performing loans and leases was 86.69% at September 30, 2011, which includes the leasing portfolio mark-to-market adjustment of $0.7 million while excluding all the FDIC-guaranteed Waterford loans.
Non-Interest Income
Non-interest income, which represented 32.8% of total revenue in the third quarter of 2011, increased 2.0%, or $0.1 million, to $3.2 million when compared with the third quarter of 2010, reflecting higher deposit service charges and insurance agency revenue. Service charges on deposits increased $27 thousand, or 5.7%, compared with the third quarter 2010, primarily due to increases in fee rates to be more in-line with market competition. Insurance agency revenue of $1.8 million was up $74 thousand, or 4.2%, when compared with the 2010 third quarter on successful commercial line commission growth. However, the soft insurance market and macro-economic conditions continue to put downward pressure on personal and commercial property and casualty insurance commissions, despite strong retention rates. Compared with the second quarter of 2011, The Evans Agency’s revenue was up $0.2 million, reflecting the typical revenue cycle seasonality.
Non-Interest Expense
Total non-interest expense was $6.8 million in the third quarter of 2011, an increase of $0.4 million, or 5.5%, from $6.4 million in the third quarter of 2010. The most significant component of the increase was salaries and employee benefits, which increased $0.4 million, or 9.8%, to $4.1 million in the third quarter of 2011. This increase reflected regular annual merit increases and increased staff, including commercial loan officers and other business-generating positions. This was partially offset by lower amortization expense related to intangible assets acquired in the 2008 purchase of Suchak Data Systems, Inc., which were fully amortized at the end of 2010 and a reduction in FDIC insurance expense due to changes in the premium calculation adopted in the second quarter of 2011 by the FDIC.
The efficiency ratio, excluding intangible amortization, increased to 69.10% for the third quarter of 2011, from 66.57% for the third quarter of 2010, as a result of the increase in non-interest expense.
Capital Management
The Company consistently maintains regulatory capital ratios measurably above the federal “well capitalized” standard, including a Tier 1 leverage ratio of 9.81% at September 30, 2011. Book value per share was $16.61 at September 30, 2011, compared with $16.14 at June 30, 2011, and $15.72 at September 30, 2010. Tangible book value per share at September 30, 2011, was $14.44, up 3.5% from June 30, 2011, and up 7.9% from the same period in 2010.
Conclusion
Mr. Nasca concluded, “Our results continue to be impressive despite the significant headwinds of a muted economy, challenging business climate, and historically low rate environment. The strong momentum we are creating has positioned us particularly well in an evolving banking landscape, where customers are being dislocated by the pending HSBC retail divestiture. Our performance is reflective of an aggressive focus on customers and organic growth, as customers look to Evans’ strength, stability, and longevity to serve all their banking, insurance and investment needs.”
About Evans Bancorp, Inc.
Evans Bancorp, Inc. is a financial holding company and the parent company of Evans Bank, N.A., a commercial bank with $733 million in assets, 13 branches and $613 million in deposits at September 30, 2011. Evans Bank is a full-service community bank, providing comprehensive financial services to consumer, business and municipal customers throughout Western New York. Evans Bancorp’s wholly-owned insurance subsidiary, The Evans Agency, LLC, provides property and casualty insurance through 14 insurance offices in the Western New York region. Evans Investment Services, Inc., a wholly-owned subsidiary of Evans Bank, provides non-deposit investment products, such as annuities and mutual funds.
Evans Bancorp, Inc. and Evans Bank routinely post news and other important information on their websites, atwww.evansbancorp.com andwww.evansbank.com.
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning future business, revenue and earnings. These statements are not historical facts or guarantees of future performance, events or results. There are risks, uncertainties and other factors that could cause the actual results of Evans Bancorp to differ materially from the results expressed or implied by such statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, include competitive pressures among financial services companies, interest rate trends, general economic conditions, changes in legislation or regulatory requirements, effectiveness at achieving stated goals and strategies, and difficulties in achieving operating efficiencies. These risks and uncertainties are more fully described in Evans Bancorp’s Annual and Quarterly Reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. Evans Bancorp undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise.
For more information contact: Gary A. Kajtoch Executive Vice President and Chief Financial Officer Phone: (716) 926-2000 Email: gkajtoch@evansbank.com
EVANS BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (Unaudited)
(in thousands except shares and per share data)
2011
2011
2011
2010
2010
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
ASSETS
Investment Securities
97,437
97,739
100,868
93,332
99,247
Loans
560,792
532,537
519,180
512,503
485,843
Leases
7,783
9,957
12,449
15,475
18,745
Allowance for loan and lease losses
(10,708
)
(10,667
)
(10,482
)
(10,424
)
(9,099
)
Goodwill and intangible assets
8,893
9,013
9,139
9,269
9,490
All other assets
68,818
64,253
68,557
51,368
54,654
Total assets
733,015
702,832
699,711
671,523
658,880
LIABILITIES AND STOCKHOLDERS’ EQUITY
Demand deposits
$
116,036
$
104,814
$
99,444
$
98,016
$
94,809
NOW deposits
48,924
44,193
43,457
32,683
30,386
Regular savings deposits
301,610
277,564
263,854
249,410
242,897
Muni-vest deposits
26,241
26,333
34,804
22,000
22,753
Time deposits
120,427
133,863
143,588
142,348
144,441
Total deposits
613,238
586,767
585,147
544,457
535,286
Borrowings
39,161
38,921
38,176
52,226
47,527
Other liabilities
12,417
10,831
12,055
11,776
12,138
Total stockholders’ equity
68,199
66,313
64,333
63,064
63,929
SHARES AND CAPITAL RATIOS
Common shares outstanding
4,106,933
4,108,103
4,094,147
4,081,960
4,067,044
Book value per share
16.61
16.14
15.71
15.45
15.72
Tangible book value per share
14.44
13.95
13.48
13.18
13.39
Tier 1 leverage ratio
9.81
%
9.80
%
9.89
%
9.93
%
9.99
%
Tier 1 risk-based capital ratio
12.65
%
13.00
%
12.95
%
13.05
%
13.28
%
Total risk-based capital ratio
13.90
%
14.26
%
14.21
%
14.31
%
14.54
%
ASSET QUALITY DATA
Non-performing loans
13,782
11,031
11,322
10,996
7,531
Non-performing leases
1,549
1,747
2,127
2,931
2,373
Total non-performing loans and leases
15,331
12,778
13,449
13,927
9,904
Net loan (recoveries) charge-offs
118
824
430
82
218
Net lease charge-offs
-
-
-
-
-
Total net loan and lease (recoveries) charge-offs
118
824
430
82
218
Non-performing loans/Total loans and leases
2.42
%
2.03
%
2.13
%
2.08
%
1.49
%
Non-performing leases/Total loans and leases
0.27
%
0.32
%
0.40
%
0.56
%
0.47
%
Non-performing loans and leases/Total loans and leases
2.70
%
2.36
%
2.53
%
2.64
%
1.96
%
Net loan charge-offs/Average loans and leases
0.09
%
0.63
%
0.33
%
0.06
%
0.18
%
Net lease charge-offs/Average loans and leases
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
Net loan and lease charge-offs/Average loans and leases
0.09
%
0.63
%
0.33
%
0.06
%
0.18
%
Allowance to loans and leases
1.88
%
1.97
%
1.97
%
1.97
%
1.80
%
EVANS BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (Unaudited)
(in thousands except share and per share data)
2011
2011
2011
2010
2010
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Interest income
8,169
8,015
8,013
7,844
7,992
Interest expense
1,655
1,728
1,716
1,759
1,759
Net interest income
6,514
6,287
6,297
6,085
6,233
Provision for loan and lease losses
159
1,009
488
1,407
1,012
Net interest income after provision
6,355
5,278
5,809
4,678
5,221
Deposit service charges
498
416
386
435
471
Insurance service and fee revenue
1,849
1,601
2,089
1,341
1,775
Bank-owned life insurance
117
110
103
109
117
Other income
720
798
883
944
760
Total non-interest income
3,184
2,925
3,461
2,829
3,123
Salaries and employee benefits
4,073
3,912
3,904
3,778
3,708
Occupancy
777
816
777
752
707
Repairs and maintenance
184
155
159
164
148
Advertising and public relations
188
247
130
180
88
Professional services
510
407
402
376
355
Technology and communications
177
220
235
259
265
Amortization of intangibles
120
126
130
221
221
FDIC insurance
135
135
229
268
312
Other expenses
639
744
639
661
645
Total non-interest expenses
6,803
6,762
6,605
6,659
6,449
Income before income taxes
2,736
1,441
2,665
848
1,895
Income tax provision
810
469
790
364
617
Net income
$
1,926
$
972
$
1,875
$
484
$
1,278
PER SHARE DATA
Net income per common share-diluted
$
0.47
$
0.24
$
0.46
$
0.12
$
0.31
Cash dividends per common share
$
0.20
-
$
0.20
-
$
0.20
Weighted average number of diluted shares
4,109,181
4,106,371
4,096,170
4,079,388
4,068,301
PERFORMANCE RATIOS
Return on average total assets
1.08
%
0.55
%
1.10
%
0.29
%
0.78
%
Return on average stockholders’ equity
11.37
%
5.90
%
11.71
%
3.00
%
7.93
%
Efficiency ratio
69.10
%
72.04
%
66.36
%
72.23
%
66.57
%
EVANS BANCORP, INC. AND SUBSIDIARIES SELECTED AVERAGE BALANCES AND YIELDS/RATES (Unaudited)
(in thousands)
2011
2011
2011
2010
2010
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
AVERAGE BALANCES
(dollars in thousands)
Loans and leases, net
$
541,357
$
524,178
$
518,246
$
504,704
$
496,037
Investment securities
98,526
100,639
95,978
96,575
98,606
Interest bearing deposits at banks
17,200
16,952
8,456
7,347
2,189
Total interest-earning assets
657,083
641,769
622,680
608,626
596,832
Non interest-earning assets
59,647
62,517
62,148
60,808
59,403
Total Assets
716,730
704,286
684,828
669,434
656,235
NOW
45,604
44,707
38,469
31,086
26,684
Regular savings
290,310
268,220
256,158
245,511
240,424
Muni-Vest savings
25,177
29,483
24,616
28,906
25,162
Time deposits
125,037
139,727
143,177
142,794
145,202
Total interest-bearing deposits
486,128
482,137
462,420
448,297
437,472
Other borrowings
39,544
39,381
44,846
47,054
46,568
Total interest-bearing liabilities
525,672
521,518
507,266
495,351
484,040
Demand deposits
111,044
105,725
101,798
97,879
96,669
Other non-interest bearing liabilities
12,273
11,144
11,737
11,582
11,099
Stockholders’ equity
67,741
65,899
64,027
64,622
64,427
Total Liabilities and Equity
716,730
704,286
684,828
669,434
656,235
YIELD/RATE
Loans and leases, net
5.36
%
5.40
%
5.52
%
5.55
%
5.73
%
Investment securities
3.69
%
3.68
%
3.57
%
3.47
%
3.57
%
Interest bearing deposits at banks
0.16
%
0.17
%
0.19
%
0.27
%
0.18
%
Total interest-earning assets
4.97
%
5.00
%
5.15
%
5.16
%
5.36
%
NOW
1.32
%
1.17
%
1.10
%
1.13
%
1.05
%
Regular savings
0.77
%
0.69
%
0.64
%
0.69
%
0.70
%
Muni-Vest savings
0.51
%
0.47
%
0.47
%
0.48
%
0.46
%
Time deposits
2.07
%
2.38
%
2.44
%
2.53
%
2.55
%
Total interest-bearing deposits
1.14
%
1.21
%
1.23
%
1.29
%
1.32
%
Other borrowings
2.72
%
2.71
%
2.64
%
2.65
%
2.71
%
Total interest-bearing liabilities
1.26
%
1.33
%
1.35
%
1.42
%
1.45
%
Interest rate spread
3.71
%
3.67
%
3.80
%
3.74
%
3.91
%
Contribution of interest-free funds
0.26
%
0.25
%
0.25
%
0.26
%
0.27
%
Net interest margin
3.97
%
3.92
%
4.05
%
4.00
%
4.18
%
2
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